Economic Focus: 2024 Outlook - Brighter prospects

21 December 2023


  • Economic take-off with government’s concerted efforts to rebuild and restructure economy
  • Subsiding external headwinds to catalyse Malaysia’s growth momentum
  • We are positive of 2024 growth prospects and expect 4.3% GDP growth
Domestic economy growing from strength to strength

Malaysia is well-positioned for a better economic growth in 2024 owing to its underlying strength in domestic demand that accounts for the lion share of the economy. Private consumption will continue to be the key growth driver, underpinned by robust labour market conditions with continued expansion in employment and income prospects. Revival in tourism activities in 2024 will likely provide a strong fillip, especially with the introduction of visa-free entry for tourists from China and India, further boosting domestic economy. For
9M23, Malaysia has achieved 3.9% GDP growth despite the external headwinds, and it looks set to improve further in 2024 given the positive economic landscape.

New growth catalyst from government policies

Thanks to the concreted efforts by the federal government to boost economic growth under the Madani Economy Framework, investment-driven spending is set to be a new growth driver for Malaysia in 2024. The implementation of the strategic developments and flagship projects under the 12th Malaysia Plan Mid-Term Review (12MP MTR), New Energy Transition Roadmap (NETR) and New Industrial Master Plan (NIMP) 2030 will accelerate the economic take-off envisaged by the government to be a paradigm shift for Malaysia. In addition, the realisation of record-high approved investments from foreign investors in 2021-2022 will ensure the manufacturing sector remains on a healthy growth trajectory in 2024.

Subsiding external headwinds

The drag from weak external demand in 2023 may reverse in 2024 as global monetary tightening cycle appears to be over. There are early signs of regional exports recovery in line with nascent turnaround in global E&E sector which bodes well for Malaysia’s external trade. Nevertheless, should a scenario of economic hard landing take place, we believe Malaysia’s diversified export structure and deep integration into global supply chain will help ensure its trade resilience.

Fiscal reforms for long-term sustainability

Malaysia’s government is committed to pursue fiscal consolidation and rebuild fiscal buffer for long-term sustainability. Under the Ekonomi Madani framework, the pace of fiscal consolidation will be further accelerated to achieve the medium-term deficit target of 3% and fiscal reforms continues to be a priority to the government. We take cognisance of the immediate pains of potentially higher consumer outlays arising from subsidy rationalisation and higher sales tax, but this has also translated into an improved fiscal deficit of 4.3% (vs 5% in 2023) despite higher 2024 development expenditure of RM90bn.

Growth momentum remains intact

We remain cautiously optimistic of Malaysia’s economic outlook which is expected to grow by 4.3% in 2024 – in line with government’s forecast of 4%-5%. Fundamentals remain strong as Malaysia’s economy continues to take comfort from its resilient domestic demand, underpinned by sustained household spending. Key downside risks include slower-than-expected recovery in external demand and heightened geopolitical tensions.